Syntrus Achmea Outlook 2021-2023 - IPE Reference Hub
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Syntrus Achmea Outlook 2021–2023
Table of contents Introduction 3 Vision: current situation & prospects 5 Investing in Dutch real estate and mortgages 21 Housing market 26 Residential mortgages market 41 Healthcare real estate market 52 Retail market 65 Mixed use 80 Cover: Klaasje Zevenster, Amstelveen 2/89 Investing in Dutch real estate and mortgages
Introduction
The ultimate impact of COVID-19 on investments When it comes to real estate and mortgages,
in real estate and mortgages remains uncertain in it is important to know the long-term economic
the short term. We expect real estate to remain effects. The prospects for user demand for homes,
a relatively attractive investment due to contin- mortgages and healthcare remain good. However,
uously low interest rates and a shortage of supply rising unemployment may have an impact on
in the residential and healthcare real estate affordability for consumers. The outlook that
markets. These factors are likely to drive underlies the government’s recent
ongoing demand for these asset classes in the Budget Memorandum predicts a substantial rise
short and medium term. By investing now, it is in unemployment, particularly in 2021. There is
possible to secure financial and social returns in nevertheless a great deal of uncertainty about
the longer term. those forecasts.
The Outlook 2021-2023 was prepared during In Q2 2020 we published various corona updates
an extraordinary period of time, in between the about economic and market developments,
relaxation of the coronavirus measures at the start each based on the latest insights on the rapidly
of June 2020 and the sharp renewed rise in the changing situation. The latest corona update
number of daily infections in mid September 2020. issued at the end of May explored a number of
recovery scenarios that still apply. These recovery
Due to COVID-19, we have spent the past half year scenarios may need to be revisited in the light of
living between hope and fear, with the dominant developments in the next six months, in which case
emotion changing by the week. The metaphorical we will issue a revised corona update in due course.
‘thick fog’ that we have been feeling our way
through since the start of Q2 2020 has dissipated
to a reasonable extent. As a society we are
becoming better and better at dealing with the
implications of this unexpected external shock. The
number of infections recently began to rise again
but radical measures such as a complete lockdown
will probably no longer be necessary. Instead
there will be specific solutions tailored to regional
circumstances. New insights have been gained
on how to treat COVID-19 patients and there is
keen anticipation surrounding rapid testing and,
of course, a vaccine. The large-scale roll out of a
vaccine is not expected until early 2021.
3/89 Syntrus Achmea Outlook 2021-2023
This outlook is comprised of three parts: The subjects addressed are as follows:
Vision: current situation & prospects Residential
This part looks at the current economic and social • a safe haven offering excellent prospects. Find
situation and outlines the prospects for investors out more in the chapter Housing market.
based on challenges related to urban development,
ESG and innovation. Mortgages
• An attractive, low-risk investment product. Find
Investing in Dutch out more in the chapter Residential mortgages
real estate and mortgages: market.
This chapter explains why Dutch real estate and
mortgages are attractive to investors, including Healthcare real estate
foreign investors. It also sets out the specific • A meaningful investment in short supply. Find
high-opportunity investment options in each asset out more in the chapter Healthcare real estate
class. market.
Focus on asset classes: Retail
Residential, Mortgages, Healthcare Real Estate • Limited opportunities available in a market in
and Mixed use are explored in detail in separate transition. Find out more in the chapter Retail
sections. Based on a description of developments market.
in the user and investment market and an
assessment of trends, we present an investment Mixed use
focus for the period 2021-2023. • Multifunctionality and location quality form the
basis for sustainable returns.
Find out more in the chapter Mixed use.
4/89 Syntrus Achmea Outlook 2021-2023
Vision: current situation & prospects
Table of contents Introduction 7 Economy 8 Society 11 Urban development 14 ESG 17 Innovation 20 6/89 Syntrus Achmea Outlook 2021-2023
Introduction Syntrus Achmea aims to deliver financial and social returns for its clients. The chances of achieving these returns depend on trends and developments and the way in which they are interpreted. This chapter addresses current issues and the challenges that they pose to investors. The first section looks at the current situation. Syntrus Achmea will outline the current issues from an economic and social perspective. The common thread running through these issues is COVID-19. During the first few months of the coronavirus crisis, Syntrus Achmea issued regular updates that explored and updated the economic scenarios. This Outlook incorporates the latest insights. Besides the impact of COVID-19 on life in general, there are also a number of political and social developments to take into consideration. This means taking stock of developments that may have a potential impact on investments in real estate and mortgages. The second section translates economic and social developments into the challenges posed to investors. These challenges are divided into three categories. First, we consider expectations in relation to urban development and indicate the challenges in relation to which institutional investors have a role to play. Secondly, we look at the ESG perspective, given the increasing importance of socially responsible investment. Finally, we examine the subject of ‘innovation’ and highlight the relevant investment opportu- nities that are available. 7/89 Syntrus Achmea Outlook 2021-2023
Economy
• The crisis caused by COVID-19 is • The Dutch economy is expected to
having an impact on Dutch society and make a ‘U-shaped recovery’. Under this
economic performance. Compared scenario, a slow economic recovery can
with other countries in the Eurozone, be expected in 2021. However there
the Dutch economy is still performing is considerable uncertainty and much
relatively well, because the lockdown will depend on the point at which a
here was less strict and the public vaccine becomes available. Until then,
finances were in a strong position at we cannot expect to see an economic
the outset. recovery in every sector.
8/16
8/89 Syntrus Achmea Outlook 2021-2023
Vision
Current situation
In March 2020 COVID-19 brought an end to six wherever possible and maintain the appropriate
years of economic growth in the Netherlands. distance. This has caused a long-term drop in
The end of the crisis is not yet in sight and demand. Political tensions between the United
there is considerable uncertainty. The economic States and China have flared up again and there
consequences are visible in sectors such as is a real chance that the previously signed trade
aviation, travel, hospitality and retail. The Dutch deal will be ditched. It should be noted that there
government has used its biggest ever financial seems to be a connection between the strictness
support package to try to keep the Dutch economy of a country’s lockdown and the extent of its
and businesses running, but will be unable to avert economic contraction.1 In Europe the economy is
a recession. expected to contract by between 8 and 9 percent.
In order to limit the damage caused to Europe’s
The global economy has been badly hit too. economy by COVID-19, European leaders reached a
The OECD is even talking of the biggest crisis historic agreement in mid-July 2020 on a European
since the Second World War. In many countries corona support package and a multiannual financial
people are committed to a lengthy period of ‘social framework (MFF).2
distancing’, in which they avoid public places
Scenarios
COVID-19 has caused an even faster decline in This uncertainty makes it advisable to consider
international trade than the financial crisis of 2008. various scenarios. The economic recovery could
There are early signs of a cautious recovery in be V-shaped, U-shaped or L-shaped.5 Syntrus
the Dutch economy, although global trade is still Achmea initially assumed that there would be a
lagging behind. The Netherlands’ dependence on V-shaped recovery, but now expects the recovery
international trade makes it particularly vulnerable to be U-shaped. This U-shaped recovery scenario
to a drop in demand from abroad. Forecasts is also the basic assumption of sources such as the
of the size of the contraction vary from 5 to 8 IMF, the European Commission, ING, Rabobank and
percent in 2020.3 Compared with other countries Oxford Economics. This recovery scenario involves
in the Eurozone, the Dutch economic contraction a longer recession. In the course of 2021 we expect
has been relatively mild because the lockdown to see a slow economic recovery, because for a
here was less strict and the public finances were long period people will still be expected to avoid
in a strong position at the outset. The digital crowds and keep their distance. A longer crisis
infrastructure of the Netherlands is also better could result in higher inflation, further fluctuations
organised, which made the large-scale switch to in supply and demand, accompanied by layoffs,
working from home relatively simple for many bankruptcies and disruptions to international
companies. The fact that the Dutch have long been trade. An extended period of uncertain economic
accustomed to online shopping was also helpful, prospects will lead to companies and consumers
keeping sales in sectors such as personal care and being cautious in their expenditure.
household items at a reasonable level.
In 2021 a recovery of between 3 and 5 percent
is expected,4 but there is still a great deal of
uncertainty.
1) https://www.volkskrant.nl/economie/coronavirus-oorzaak-van-acht-unieke-economische-records~bc6cc353/
2) https://fd.nl/economie-politiek/1351378/akkoord-in-brussel-over-begroting-en-herstelfonds
3) https://economie.rabobank.com/economisch-kwartaalbericht/
4) https://www.cpb.nl/juniraming-2020 https://www.dnb.nl/binaries/NL_2020%20EB%20Nummer%204_tcm46-389179.pdf
5) Syntrus Achmea Outlook 2020-2022 Update COVID-19: http://www.syntrusoutlook.nl/2020-2022/corona-update/
9/89 Syntrus Achmea Outlook 2021-2023
Challenges It is difficult to predict the depth and duration Since July 2020 the number of infections has been of the economic crisis and therefore also the rising again worldwide. The virus is spreading implications for investments in real estate and once more and this trend can now be described mortgages. The fate of the Dutch economy as a second wave. A second large-scale outbreak will depend heavily on how the virus outbreak accompanied by stringent measures would once continues to evolve (for example, will stricter again have a heavy impact on the Dutch economy. measures be adopted at local or regional level?) The big question is: when will a vaccine become and on the development of a vaccine. There is also available? Most experts assume that this will not uncertainty about the economic consequences of happen until during 2021. Until then, we cannot government measures to curb the pandemic. It expect to see an economic recovery in every sector. is encouraging that the spread of the virus in the Netherlands and many other European countries decreased sharply in May and June 2020 and that governments have relaxed the measures. 10/89 Syntrus Achmea Outlook 2021-2023
Society
• In recent years there has been a much and self-employed people. In addition,
greater focus on social subjects such as a support agreement has been reached
livability and quality of life. COVID-19 specifically for retailers, in order to
and the social-distancing measures facilitate tailored solutions for surviving
have further increased that focus. Other the crisis. After lengthy negotiations,
developments are also having an impact a pension agreement was finally
on our society and the real estate sector agreed shortly before the summer of
in particular, for example the measures 2020. This agreement is intended to
related to nitrogen emissions and the deliver a simple, understandable and
debate on PFAS, as well as measures to personalised pension system that takes
encourage modular, energy-neutral and account of the different investment
nature-inclusive construction. horizons of younger and older people.
An alternative to the widely discussed
• In the political arena, the government is ‘emergency brake’ for the housing
making considerable efforts to counter market has also been presented, with
the effects of the crisis. Emergency the aim of preventing excesses.
packages have been put together to
provide financial support to companies
11/89 Syntrus Achmea Outlook 2021-2023Current situation The world is continuously changing. The Netherlands are being hit disproportionately and have taken has evolved from a relatively homogeneous and action. The government’s decision on nitrogen stable society into a society of great variety, diversity emissions has disadvantaged the construction and complexity.1 These changes present challenges. industry as well, which is also having to deal with the How do we ensure that everyone can live together debate on PFAS. As a result, construction projects comfortably and peacefully with a sense of mutual have been severely delayed or come to a standstill. connection and equal opportunities for all? COVID-19 The strict rules on moving contaminated soil have and social distancing are having a major impact on been relaxed slightly, apparently creating more Dutch society and behaviour. In some respects this scope for a resumption of construction activities.2 exacerbates tensions, causing fear and uncertainty. At the same time work is being done to develop As a result, a debate has arisen about whether modular, energy-neutral, circular and nature-in- economic well-being should be sacrificed for the clusive construction methods and to make better sake of public health. Besides COVID-19, there are use of innovative technologies and materials.3 Smart, also other developments that are having an impact innovative construction may also offer a solution to on society. Measures to reduce nitrogen emissions the relentless rise in construction costs. It would also and the debate about those measures, are affecting reduce nitrogen emissions. a large number of sectors. Farmers believe that they Politics COVID-19 is also having a political impact. Since pension agreement is currently being elaborated in March 2020 the government has been heavily further detail and should be complete by the start of engaged in action aimed at curbing the pandemic. 2022. This will result in a simple, understandable and A national crisis organisation – the Ministerial personalised pension system. 4 An alternative to the Crisis Control Committee – has been established widely discussed ‘emergency brake’ for the housing to coordinate these efforts. The government has market has also been presented. This involves supported businesses and self-employed people measures to give people on average incomes and with two emergency support packages, while a third starters greater opportunities in the housing market. package is currently being prepared. In addition, a An upper limit will be set for annual rent increases specific agreement has been concluded for retailers in the liberalised sector and protection against by a variety of sectoral organisations, landlords, ‘buy-to-let’ will be introduced. This will require banks and the Ministry of Economic Affairs. This institutional investors to self-regulate. support package creates scope for customised solutions for supporting retailers that experience Like in many other European countries, the Dutch serious financial difficulties. But COVID-19 political landscape has become fragmented in has not been the only subject on the political recent years. The big parties are getting smaller agenda in recent months. In June 2020, following and the small parties are getting bigger. New lengthy negotiations, the social partners and the movements are emerging and the dominance of government finally concluded a pension agreement. the established parties is in decline. In this context, The reformed pension system will no longer provide the outcome of the 2021 elections for the Dutch a nominal commitment, but will instead involve a House of Representatives will be worth watching. more individualised accumulation of capital under It is almost certain who the party leaders will be a contribution scheme that incorporates collective and the parties are ready to start campaigning in risk sharing. Attention will be paid to the different the autumn of 2020. The manifestos have not yet investment horizons and the associated risks been published, but the key general subjects are of younger people as opposed to older people. expected to be the climate (for example nitrogen Pension funds may vary the investment mix for emissions, Green Deal) and immigration, alongside investments in real estate and mortgages, since more topical issues such as COVID-19 and racism. their schemes will no longer provide a nominal commitment, and investment will not be dependent on age and may also continue after retirement. The 1) https://kennisopenbaarbestuur.nl/thema/trends-en-ontwikkelingen/ 2) https://www.bnr.nl/nieuws/binnenland/10414339/bouwend-nederland-blij-met-verruiming-pfas-normen 3) https://www.pwc.nl/nl/actueel-en-publicaties/diensten-en-sectoren/bouw/stikstofbesluit-en-aanbevelingen-commis- sie-remkes-voor-de-bouw.html 4) https://www.verzekeraars.nl/media/7180/pensioen.pdf 12/89 Syntrus Achmea Outlook 2021-2023
Social
In recent years there has been a much greater focus Although COVID-19 has greatly increased social
on social subjects and a keener awareness of social solidarity and trust, this is expected to be temporary
developments.1 Although Dutch people have for phenomenon, owing to the shift in values that is
many years been among the most content in the required in order to achieve permanent change.
world and score well when it comes to livability Such a shift in values generally takes place over
and living conditions, there are concerns about the several generations.3 COVID-19 may leave a lasting
quality of life of, for example, people with a lower impression on young adults, who are growing up
level of education and lower incomes.2 As variety during a crisis and whose futures will be shaped by
and diversity have increased in the Netherlands, these socioeconomic conditions. The coronavirus
tensions have flared up from time to time. Unease crisis will have a major impact on them and in the
and dissatisfaction have polarised the political longer term it may cause a permanent change
debate. ‘Black Lives Matter’ is a key example of such in attitudes.
a movement. Instead of emphasising the differences
between cultures and groups, it is crucial to find
common ground and seek connection.
1) https://www.communicatierijk.nl/vakkennis/trends-voor-overheidscommunicatie/trendoverzicht-2019/de-samenleving-
wordt-steeds-meer-‘woke’
2) https://www.sociaalweb.nl/cms/files/2019-09/de-sociale-staat-van-nederland-2019-def-.pdf
3) Verwachte gevolgen van corona voor de opvattingen en houdingen van Nederlanders (Expected implications of corona-
virus for views and attitudes of the Dutch), SCP – 17 July 2020: https://www.scp.nl/publicaties/publicaties/2020/07/17/
verwachte-gevolgen-van-corona-voor-de-opvattingen-en-houdingen-van-nederlanders
13/89 Syntrus Achmea Outlook 2021-2023Urban
development
• In order to remain future-proof and • The Netherlands and the real estate
relevant, cities need to demonstrate sector are confronted with the challenge
resilience and adapt to changing of a major transition: a structural
circumstances. The city of the future transformation of how the country
faces many challenges. COVID-19 and sector are organised and how all
is making it even more urgent to the parties work together. Delivering
respond to important trends, such as future-proof cities and encouraging
ongoing urbanisation, facilitating rapid social cohesion will require connection
population growth in cities and the and close cooperation.
strong rise in demand for mid-market
rental housing.
14/89 Syntrus Achmea Outlook 2021-2023Role of the city vs. the countryside
COVID-19 has opened up a new perspective on the Others will move to the newly developed
role of cities vs. the countryside. As working from city outskirts, while continuing to benefit from all
home becomes the new normal, it will no longer be that the city has to offer. This trend is known as
essential for people to live close to the office. Rural reurbanisation.
areas have lower housing prices, as well as more
open space and greenery. Although the appeal The city of the future is a city in balance, offering
of rural areas is growing, particularly for families both busy spaces and peaceful spaces. It will have
with children, there will not be a mass migration variation between densely urbanised areas and
from city to countryside. Even before COVID-19, greenery and open spaces. Pedestrians and cyclists
people living in the Randstad region were already will be given more room, while the dominance of
swapping their city dwellings for homes in the car will decline. The city of the future will take
rural areas. Ambitious young people are always account of livability and safety and will encourage
expected to be drawn to cities. social cohesion. It will be a city for everyone. A city
whose residents are healthy and happy.
Opportunities and challenges presented by COVID-19
Even before the pandemic, cities were facing COVID-19 is accelerating these trends. The
challenges, such as rapid urbanisation pandemic has changed how people think about
and the accompanying population growth. The mobility, work and cities. In most cities, livability
affordability of housing is under pressure, with is under pressure. The challenge is to maintain the
particularly high demand in the mid-market appeal of cities for ambitious young people, families
segment. But there are also issues in relation to with children and older people. In doing so it will be
mobility and infrastructure. The demand for homes necessary to take advantage of the potential of the
in the Netherlands is substantial. Over the next city while ensuring sufficient quality of housing and
ten years at least 800,000 additional homes will life. In most cities there is a qualitative mismatch
need to be built. At the same time, the debate on between demand and supply. Many people don’t
particulate matter, nitrogen and carbon emissions live where they want to live. Supply seems to drive
is hampering these construction efforts. Climate demand. For all functions – housing, work, retail and
change is also forcing the construction and real relaxation – the focus needs to shift from quantity
estate sector to adapt by building differently and to quality and more consideration must be given to
using new materials, such as timber. greenery and public spaces.
The challenge of transition
The Netherlands and the real estate sector urban areas. A Digital City is a city arranged in
are confronted with the challenge of a major a smart, sustainable and efficient way, possibly
transition: a structural transformation of how the supported by technology. The key to the smart
country and sector are organised and how all the city and to new urban strategies is to be resilient
parties work together. From an economy focused and future-proof. The aim is also to ensure that the
overwhelmingly on finance to an economy for the built environment is multifunctional and diverse. An
common good, which prioritises the importance of Inclusive City is a city for everyone, a city whose
people and nature rather than the pursuit of profit. residents are healthy and happy. Increasing isolation
For urban areas and district developments, compre- and widening differences between population
hensive added value and long-term resilience will groups present a major urban challenge.
be essential. It is all about balance: the collective vs. The key is to create meeting spaces with a view
the individual, the short term vs. the long, evolution to the various target groups and their needs. A
vs. revolution and the influence of the old and the Green City is a city with plenty of greenery and
young on society’s revenue models. public spaces. These are places where residents can
exercise, relax and meet their family and friends.
For the purposes of this transition, Syntrus Achmea Multifunctionality is also essential in this connection.
has formulated three themes: the Digital City, the Parks may also function as gyms, car parks as cafe
Inclusive City and the Green City. These themes terraces and roads as cycling and walking routes.
constitute the perspective from which we view
15/89 Syntrus Achmea Outlook 2021-2023Urban partnerships
The city of the future faces many challenges. Some key urban themes include making housing
Delivering future-proof cities and encouraging more affordable for specific target groups,
social cohesion will require connection and encouraging social cohesion at neighbourhood level
close cooperation. It calls for partnerships with and developing new mobility concepts. The biggest
urban stakeholders, such as municipalities and challenge is the housing shortage. Research on
developers, aimed at helping to improve cities demographic developments shows that the housing
and neighbourhoods on the basis of a shared shortage is worst for single-person households and
vision: making them more appealing, sustainable senior citizens. Investors, housing associations and
and inclusive. Furthermore, the issues related to municipalities need to put more emphasis on
city-centre district development are too complex to working together to deliver the right product. This
solve alone. Partnerships will be crucial. is not only about financial returns, but also about
future-proof living environments. A comfortable
living environment helps improve the well-being and
happiness of a city’s residents.
Relevance to investors
It is crucial for investors to be aware of the essential Only with knowledge of trends and challenges,
requirements for a city and for future-proof as well as considerable commitment and close
locations, combined with knowledge of urban target cooperation, will investors be able to create livable
groups. Although dynamics in cities and society in and safe living environments.
general are currently dominated by COVID-19, cities
are not losing their appeal.
16/89 Syntrus Achmea Outlook 2021-2023ESG
• The climate remains the key challenge • Tenants are increasingly choosing
of our times. In the years ahead a great homes on the basis of their
deal of attention must be given to urban surroundings. A long period of being
flooding and heat stress caused by real isolated at home due to COVID-19 has
estate and new investments. Besides the altered many people’s attitudes to their
climate, there also needs to be a focus own living environment. Increasingly,
on sustainable mobility and sharing people feel the need for connections
concepts, also known as ‘mobility as a with neighbours, other residents and
service’. the neighbourhood itself. Spontaneous
encounters in community spaces and
shared usage schemes can help to fulfil
this need.
17/89 Syntrus Achmea Outlook 2021-2023Climate change
Although it may have been pushed into the higher domestic energy consumption? It will be
background by COVID-19, the climate remains necessary to reduce demand for energy and, in
the key challenge of our times. For investors, two the slipstream, to (collectively) generate energy
dimensions are important: on the one hand, limiting from clean sources. In addition, circularity in the
climate change by reducing carbon emissions and, construction industry and the reuse of waste
on the other, pursuing climate adaptation strategies can also contribute to delivering the necessary
to deal with the effects of noticeable climate reductions.
change.
Besides climate-neutrality, climate-proofing will
It is essential to reduce carbon emissions. become another factor for investors to take
Long-term targets for Dutch emissions are set out into account. The impacts of climate change are
in the 2019 climate agreement: a 49% reduction varied: flooding due to extreme rainfall, weakened
compared with 1990 levels by 2030 and a 95% foundations due to declining groundwater levels,
reduction by 2050. The coronavirus crisis has led as well as heat stress in urban areas and wildfires.
to lower emissions, particularly in Q2 2020, due In the next few years we will need to focus heavily
to reductions in road traffic and air travel. After on identifying the risks posed to real estate and
Q2 2020, emissions rose once more as restrictions new investments. Building modifications might be
were relaxed. The impact of working from home necessary, but adaptations may also have to be
will only become clear over the longer term. Will made to new-build construction projects.
the reduction in transport movements outweigh
Mobility
COVID-19 has had an unexpected impact on economic and social value. Sustainable mobility also
mobility. The Netherlands Institute for Transport involves several other aspects, however. The market
Policy Analysis (KiM) says that the pandemic share of fully electric-powered cars is surging, while
has boosted the popularity of cars and bicycles, sales of e-bikes recently overtook traditional bikes.
while public transport is struggling. After years of More relevant to investors is the rise of shared
apparently unstoppable growth, it seems almost mobility schemes. A concept like Mobility as a
unbelievable that the Dutch railway operator NS Service (MaaS) represents a transition, in which
has been forced to take far-reaching measures and the consumer buys mobility rather than investing
announce significant redundancies. Partly in view of in a mode of transport. The essential change for
the substantial investments made in recent years, investors is that they need to start thinking in
rail travel is firmly expected to be ‘back on track’ in terms of service levels, based on additional revenue
due course. After all, the public transport network streams. New services will consist of a combination
forms the backbone for sustainable development of public transport, demand-driven transport
in the Netherlands. This network is the basis for an and private vehicles and the service will include
intricate urban structure, within which each location planning, booking and paying for the trip.
has its own optimal mix of functions with both
Livability
The dimensions that determine the livability of In addition, investors can boost the livability of a
an area or location for tenants – and therefore neighbourhood by means of their real estate
their choice of home – will have to be taken into investments. For instance, they can rent out
account in the investment decision. A long period residential units to target groups such as students,
of being isolated at home due to the coronavirus starters or senior citizens with care needs, in order
has altered many people’s attitudes to their own to increase local diversity. Adding mid-market
living environment, by forcing them to spend more rental properties to a neighbourhood where there
time there. Livability is related to health, safety and is lots of social housing can help encourage people
sustainability, but also variation as well as other to move up the housing ladder. Another option is
residents and users. The extent to which these to accommodate services and facilities that are
aspects help make a living environment (or attitudes relevant to the neighbourhood in the ground floor
towards it) more appealing will vary from person to of residential complexes. This will necessitate a
person. For investors it would be wise to realise that carefully devised concept that gives consideration
tenants don’t just choose a home, but also take the to the needs of target groups and takes into
living environment into account in their decision. account the features of a location.
18/89 Syntrus Achmea Outlook 2021-2023Social cohesion People are social beings and benefit from social Besides being an important goal in itself, social interaction, which contributes to their sense of cohesion also has a financial component: real well-being. When people feel happier, their health estate that makes its residents/users happy will benefits too. This highlights a crucial argument remain of value to them for longer, making it a for investors to use their investments to boost better investment. Happy residents take better social cohesion. It is about experiencing a sense of care of their homes and living environments, which connection with others, but also a sense of respon- reduces operating costs. Generally speaking, this is sibility for each other’s welfare. Community spirit a way of limiting or even avoiding social problems. is particularly easy to encourage in a residential For example, it can reduce health complaints and complex or neighbourhood. This can be achieved by isolation, which occur in all population groups. facilitating spontaneous encounters, for example in Social cohesion lowers the barriers that stop community facilities or spaces, or by offering shared people from looking out for one another. usage schemes for mobility. In larger complexes a community manager can foster connections among residents and possibly even within the neighbourhood. 19/89 Syntrus Achmea Outlook 2021-2023
Innovation
• Innovation has a crucial role to play • A specific example would be timber
in the search for long-term, stable construction, which reduces carbon
returns on real estate and mortgage emissions, or focusing on the health and
investments that have a positive impact happiness of residents by reconfiguring
on people, society and the environment. real estate to respond more effectively
This may involve investing in new asset to the rapidly changing social context of
classes or demand-driven investment cities and residential buildings. Another
that focuses on target groups. example would be investing in the right
product/market combinations based on
clearly segmented target groups.
20/89 Syntrus Achmea Outlook 2021-2023The importance of innovation
As an investment manager, Syntrus Achmea demand-driven investment by focusing
believes that innovation has a role to play in the on target groups.
search for long-term, stable returns on real estate
and mortgage investments that have a positive With respect to each innovation initiative, it is
impact on people, society and the environment. relevant to answer two questions before moving on
Innovation may be linked to the changing needs of to implementation:
investors for instance through the implementation • Is it feasible: can it be achieved under
of ESG policy, to trends related to investment in reasonable conditions?
real estate and/or mortgages (such as the rise of • Is it viable: can it be operated/generate a profit
new asset classes) but also through dynamism to in the longer term and will it make a positive
the user market or investment market, centered on contribution to the risk/return profile?
Types of innovation
Innovations in investment management come in a • Improving the operation of the real estate in the
variety of types: portfolio: for example by offering services or
• New assets classes: for instance investing in shared mobility schemes to tenants or by using
mixed-use properties or social real estate; smart sensor technology;
• Existing asset classes with a different risk/ • New concepts: for instance investing in
return profile: for instance residential properties residential complexes that focus heavily on
constructed from timber; and other health and happiness.
impact investments
• Customer preferences: for example new funds
with a geographical focus based on ESG
or target groups;
Examples
Timber construction – This brings together a variety for health insurers by cutting demand for healthcare,
of innovative aspects, the unifying theme of which and healthy buildings can also be expected to
is impact. As a form of circular construction, timber reduce their tenants’ housing costs.
construction makes a significant contribution to
reducing carbon emissions. The short construction Focus on target groups – For investors, the question
time can help accelerate efforts to tackle the ‘who is the end user of the real estate in which we
housing shortage. It also meets demand for living invest?’ is becoming increasingly important. This
environments where residents can be healthy and is in line with the trend towards demand-driven
happy. Timber construction fulfils a broad range investment, in other words: investing in the right
of social needs and helps investors to combine product/market combinations with a focus on
financial and social returns. clearly segmented target groups. This enhances the
quality of a portfolio and reduces risk. Target group
Focus on health and happiness – Real estate that segmentation helps to gain greater insight into the
takes account of the user – and their health and behaviour, wishes and preferences of different types
happiness -– is better configured for the rapidly of tenants, thereby enabling a building to more
changing social context of cities and residential closely match their needs and requirements.
buildings and can therefore be operated for longer.
Happy residents take better care of their homes and
living environments, which reduces the landlord’s
operating costs. Greater engagement will also boost
social interaction. Buildings that promote the health
of residents may deliver lower insurance premiums
21/89 Syntrus Achmea Outlook 2021-2023Investing in Dutch real estate and mortgages
Dutch real estate and residential mortgages investment portfolios of pension funds for decades
offer Dutch and international investors excellent and that more and more international investors are
opportunities for diversifying their investment becoming interested in the possibility of investing
portfolios while maintaining an attractive balance in Dutch real estate and mortgages. Interest among
between return and risk. So it’s unsurprising that international investors has shown particular growth
this asset class has been an established part of the over the past five years.
INVESTMENT VOLUME IN DUTCH REAL ESTATE BY OWNERSHIP
x € billion
25
Other
20 Private
Institutional
15 Non-Dutch
10
5
0
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
H1
Source: RCA (2020), adapted by Syntrus Achmea Real Estate & Finance
The Netherlands has an open, diversified economy and for many years the Netherlands has scored well
and a stable, balanced political climate. Urban on the real estate transparency index. The basic
planning is strongly regulated, which contributes to conditions are in place to facilitate responsible
the shortage of real estate. Lots of data is available investment in sustainably developed real estate.
TOP 15 GLOBAL REAL ESTATE TRANSPARENCY INDEX 2020 (THE LOWER THE SCORE, THE BETTER)
Hong Kong
Singapore
Belgium
Finland
Switzerland
Germany
Sweden
Ireland
The Netherlands
New Zealand
Canada
France
Australia
United States
United Kingdom
0 0,5 1,0 1,5 2,0
Source: JLL (2020), adapted by Syntrus Achmea Real Estate & Finance
23/89 Syntrus Achmea Outlook 2021-2023The Dutch economy is based on a mix of services, mainly relates to mortgage debts for people’s
trade and industry, making it resilient to economic own homes. In recent years the Dutch economy
adversity. The Netherlands also has relatively high has grown at the same pace as the Eurozone.
incomes, a high level of savings, good pensions and Although it is not yet possible to determine the
low unemployment rates, which keeps consumer precise impact of COVID-19, the initial predictions
expenditure at a high, stable level. On the other of Oxford Economics indicate that the economic
hand, the Netherlands has one of the highest contraction in the Netherlands has been relatively
household debt levels in Europe, although this limited compared with the rest of the Eurozone.
ECONOMIC GROWTH
Percent
10
Forecast Eurozone
8
6 The Netherlands
4
2
0
-2
-4
-6
-8
-10
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
Source: Oxford Economics (2020), adapted by Syntrus Achmea Real Estate & Finance
The Netherlands’ demographic outlook is investments in real estate and mortgages, partic-
attractive, particularly in comparison with Europe ularly because long-term trends such as expanding
in general. Steady population growth, with an urban areas, shrinking households and population
expected increase of 1.2 million (6.8 percent) by ageing present specific opportunities in specific
2030, offers good opportunities for long-term investment segments or geographic regions.
FORECAST FOR POPULATION GROWTH COMPARED WITH 2020 PER SIZE OF MUNICIPALITY
250.000 inh. or more
2030
150.000-The Dutch investment market for real estate The Dutch retail market offers sharply variable
and mortgages has a number of interesting prospects, including both opportunities and
categories, within which there are a variety of threats. Suburban centres and shops that focus
attractive subsegments. The key characteristics are on daily necessities are generally immune to
summarised below. economic downturns and therefore offer opportu-
nities to investors. Shopping centres and city
Investing in Dutch rental housing offers a centres present a mixed picture. Particularly in
strong basis for stable financial returns. There secondary shopping streets and shopping centres
is a structural housing shortage that will persist that have a less dominant position, vacancy rates
throughout the next few decades, causing huge are increasing, rents are under pressure and initial
demand for housing both now and in future. yields are rising. Over the longer term demographic
Although there are housing shortages in all growth will continue to ensure sufficient consumer
segments, the mismatch between supply and potential in attractive city centres and traffic
demand is particularly great in the mid-market locations, thereby offering investment opportu-
segment. There are many opportunities available nities.
here and the rental risk is limited due to the
relatively low rents involved. By investing in Mixed-use real estate presents opportunities due
sustainable mid-market rental housing it is also to the pressure on the big cities. The larger Dutch
possible to achieve social returns. cities are vigorously pursuing densification in
order to satisfy the high demand for housing and
As an investment, Dutch residential mortgages are adding urban functions to boost the vibrancy
offer an excellent risk/return ratio. The risk of city centres outside office and shopping
is somewhere between that of government hours. Mixed-use buildings – both new-builds and
bonds and covered/non-covered investment transformations – have a crucial role to play in this
grade corporate bonds. However, the returns respect and as a result, the investment opportu-
are higher. The risk of losses is limited by social nities in this category will increase.
security and the good payment ethics of Dutch
households. Furthermore, over the past ten years Long-term interest rates in the Netherlands have
the government has implemented reforms to the dropped relatively sharply since 2014, reducing the
mortgage market, improving its robustness. returns on risk-free investments. The large volume
of capital in the market and the search for yield
The Dutch healthcare real estate market offers have made alternative investment segments, such
strong fundamentals. Population ageing and the as real estate and mortgages, relatively attractive to
out-of-date stock real estate in this category are investors on account of the high risk premium. Since
driving high demand for healthcare real estate. it is realistic to expect a scenario of low interest
There is strong political commitment and a clear rates to continue in the longer term, risk premiums
policy direction. Healthcare real estate is relatively will ensure that real estate remains a relatively
immune to economic downturns and offers attractive investment. In the short and medium term
investors the chance to achieve social impact. this is likely to continue to drive demand for real
estate. The initial yields that investors are willing to
accept on real estate investments are expected to
remain relatively low as well.
RISK PREMIUM IN REAL ESTATE SEGMENTS (BASED ON DIFFERENCE BETWEEN HIGHEST INITIAL YIELDS
AND 10-YEAR GOVERNMENT BONDS)
Percent
6
Intramural healthcare
5 real estate
Residential
4
Offices
3 Retail
2
1
0
2010 Q2
2010 Q4
2011 Q2
2011 Q4
2012 Q2
2012 Q4
2013 Q2
2013 Q4
2014 Q2
2014 Q4
2015 Q2
2015 Q4
2016 Q2
2016 Q4
2017 Q2
2017 Q4
2018 Q2
2018 Q4
2019 Q2
2019 Q4
2020 Q2
Source: C&W (2020), CBRE (2020), Oxford Economics (2020), adapted by Syntrus Achmea Real Estate & Finance
25/89 Syntrus Achmea Outlook 2021-2023The Dutch residential market
Outlook for the Dutch
residential market
Dutch rental housing:
a safe haven that offers excellent prospects
The Netherlands is becoming more densely the other segments benefit from the housing
populated, older and more diverse. The shortage. For years, house prices have been
number of households is increasing and the rising faster than household disposable income.
construction of new homes remains structurally The same applies to rents in the liberalised
insufficient to eliminate the housing shortage. rental sector. The shortage of investment
In the short term this shortage will actually product, combined with investor interest in
increase further. As a result, the vacancy risk is residential properties, means that prices will
low. Consequently, Dutch residential property continue to rise in the long term. Particularly
is a safe investment category, including when in a number of big cities, there is a shortage
viewed from an international perspective. of affordable housing for a broad group of
This applies not only in the Focus region; people on average incomes. That is why institu-
there is also upwards potential (including tional investors are increasingly investing in
rental potential) in a number of cities in the mid-market rental housing. There is structural
Opportunity region. demand for this type of housing and a low
vacancy risk, even during economic downturns.
The coronavirus is causing uncertainty for the Stable long-term returns and social impact are
housing market in the short term, which means the ideal match for the investment policy of an
that a brief dip in prices may be expected. institutional investor.
In the rental market, this will mainly have an
adverse impact on the prime segments, while
Boschkens-West, Goirle
27/89 Syntrus Achmea Outlook 2021-2023The housing market in focus
Social rental
Mid-market rental
Other liberalised rental
Owner-occupied housing Multi-family residences
Single-family residences
The Netherlands has around 7.8 million residential homes) are rented out in the mid-market rent
properties. This housing stock is divided into four sector. The remaining 200,000 residential
ownership categories and two housing forms. Our properties are rented out for more than
analysis of the development of these ownership €1,000 per month and a portion of them for more
categories and housing forms has been made with than €1,500. In the period 2021-2023 this number
the aid of simulations from a housing market model will rise to 215,000, which amounts to 5,000 new
(ABF Socrates). This model charts supply and homes per year.
demand and explores the future based on various
scenarios. We also distinguish between three Owner-occupied housing
geographical areas with different outlooks. The Netherlands has around 4.5 million owner-oc-
cupied homes. Accounting for 57 percent of
Ownership categories the total housing stock, this is the most popular
housing form in the country. The high demand,
Social rental driven by low mortgage interest rates, is reflected
The Netherlands has around 2.7 million homes in rising house prices.
that are rented out for less than the rent control
ceiling, which is €737 per month in 2020. This Housing forms
accounts for more than 35% of housing stock in the The four ownership categories can be subdivided
Netherlands. This social rental housing is allocated into two housing forms: single-family and
to people in low income groups. The construction multi-family residences.
of new social rental housing has remained low in
recent years due to the levy on lessors. Housing Single-family residences
associations have announced that they will be Single-family residences are homes that have their
making substantial investments in new homes in own garden and are intended to accommodate
the coming years. a single household (family). This housing type is
divided into a number of subcategories based on
Mid-market rental location (detached, semi-detached, corner houses
The mid-market rental segment encompasses or terrace houses) or layout (split-level houses and
rents ranging from the recent control ceiling up to what the Dutch call a ‘drive-in home’, with a garage
approximately €1,000. In 2020 there are approx- at ground level). The number of single-family
imately 400,000 rented homes in this segment. residences in the Netherlands has risen sharply
According to forecasts (ABF Socrates), the in recent decades on account of the construction
number of mid-market rental homes is set to rise of new-build housing estates. In fact, this is now
to 520,000 by 2040 (+25%). In the longer term, the most popular housing form, accounting for a
demand for mid-market rental housing is expected total of 5 million homes in the Netherlands. Of this
to be high and, because it concerns a broad target number, 312,000 fall within the liberalised rental
group, it will be virtually structural in nature. segment.
Other liberalised rental housing
The liberalised rental housing sector accounts for
600,000 properties, which is 7.7 percent of the
total housing stock. The vast majority (400,000
28/89 Syntrus Achmea Outlook 2021-2023Multi-family residences Opportunity
A multi-family residence is a home in a complex The Opportunity region mainly consists of
which also contains other homes and which is smaller municipalities situated close to the Focus
often located in an urban area. This type of housing region and medium-sized cities that are also well
typically has shared staircases/lifts, entrances connected to the bigger cities. Some examples of
and outdoor spaces. The apartment segment these municipalities are: Gouda, Deventer and Ede.
is divided into a number of subsegments such
as student accommodation and senior citizen Other
housing (self-contained or with shared facilities). The Other region consists of municipalities that
There are a total of 2.75 million apartments in the are located on the periphery and have a weaker
Netherlands, 305,000 of which are in the liberalised demographic prognosis. Some examples of these
rental segment. municipalities are: Roermond, Goes, Den Helder
and Almelo.
Strategic regions
Syntrus Achmea’s categorisation of strategic
regions primarily indicates the attractiveness of
particular municipalities over a 10-year horizon. This
is based on expected demand for housing in the
liberalised rental segment, housing preferences and
the housing shortage. Syntrus Achmea has divided
municipalities into three strategic regions that
share similar characteristics.
Focus
The Focus region consists of municipalities with
high demand for housing, high prices and also
high housing shortages. Some examples of these
municipalities are: G4, Eindhoven, Groningen and
Nijmegen.
29/89 Syntrus Achmea Outlook 2021-2023Facts and figures
Average apartment size
A multi-family The multi-family residences
residence in the built in Amsterdam most
71 m²
Netherlands recently (since 2015) are
has an average the smallest (57 m²)
surface area of (Source: Statistics Netherlands)
Sustainability Age of
home-leavers
21.7% The housing shortage means that
younger people are living with their
parents for longer. On average
is the share of total CO2 emissions they left home at
23.5
accounted for by Dutch households
in Q1 2020, a large portion of which
is attributable to homes. It is
year old
therefore essential to make homes
more sustainable
(Source: Statistics Netherlands)
(in 2017), compared
with 22.8 in 2012
(Source: Statistics Netherlands)
Mid-market rental Demographics
In the next 20 years there will
be an extra
1 million
75%
households in the Netherlands,
an increase of 13 percent
(Source: ABF)
of residential properties owned by
institutional investors are in the
mid-market rental segment, i.e.
rents ranging from €720 to €1,000
(Source: IVBN)
30/89 Syntrus Achmea Outlook 2021-2023Market trends
User market
HOUSING SHORTAGE
Number x 1.000 Percent
450 6
Forecast Housing shortage
400
5 (left axis)
350
Relative housing
300 4
shortage (right axis)
250
3
200
150 2
100
1
50
0 0
1970
1978
1986
1990
1994
1998
2002
2005
2006
2010
2012
2015
2016
2019
2024
2029
Source: DNB, Primos, adapted by Syntrus Achmea Real Estate & Finance (2020)
The housing shortage has risen to a record level This shortage will increase further in the years
in recent years, driven by accelerated population ahead. Demand will remain high, while the tighter
growth and insufficient housing construction. There requirements on nitrogen emissions, PFAS and
are regional differences: the shortage is largest noise will prevent supply from adapting to keep
in the agglomerations of the Randstad region, pace. In addition, these requirements will push up
Gelderland and North Brabant. costs and contribute to lower initial yields.
PRICE TRENDS
Percent
10
Trend in vacant
8
possession values
6
4 Rental growth
2 Trend in incomes
0
-2
-4
-6
-8
-10
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Source: Eurostat, Statistics Netherlands, MSCI, adapted by Syntrus Achmea Real Estate & Finance (2020)
Housing prices have risen sharply in recent years Because the housing shortage is set to persist,
due to a combination of low mortgage interest housing prices are likely to rise further over the
rates, the housing shortage and a strong economy. long term. Rents will only come under pressure in
Rental prices have shown stable growth over the the prime segment.
same period. The sharp rise in housing prices (for
both owner-occupied and rental properties) has
steadily eroded the affordability of homes, as
incomes have not risen at the same rate. COVID-19
may cause a price dip in vacant possession values.
31/89 Syntrus Achmea Outlook 2021-2023AFFORDABILITY
Percent
30
Liberalised
25 rental housing
Average
20
Social
15 Owned-occupied
10
5
0
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Source: Eurostat, adapted by Syntrus Achmea Real Estate & Finance (2020)
Residents of rental properties in the liberalised have declined in relative terms as incomes have
rental sector are spending an increasing share of risen and mortgage interest rates have fallen.
their income on housing costs. In contrast, the Adding more mid-market rental homes to the
housing costs of homeowners and tenants in the housing stock will improve affordability. This will be
social rental sector a key challenge for institutional investors.
VACANCY RATES
Percent
8
Multi-family
7
residences
6 Single-family
5 residences
4
3
2
1
0
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020 H1
Source: MSCI, adapted by Syntrus Achmea Real Estate & Finance (2020)
Vacancy rates in rental housing have declined In mid 2020 residential vacancy rates were slightly
sharply in recent years. Vacancy rates for single- higher than at the end of 2019. Although economic
family residences are lower than for multi-family uncertainty is driving vacancy rates up further, the
residences, which generally change occupants less housing shortage will limit the rise.
frequently because the target group (families) are
more attached to their homes than households who
live in apartments.
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